The Indian rupee weakened to a two-month low against the US dollar on Thursday as a global selloff in government bonds pushed borrowing costs higher and rising crude oil prices added fresh pressure on India’s import bill.
The rupee ended at ₹96.315 per US dollar, down around 0.5% on the day. It was the currency’s sharpest single-day decline in more than two months and came after the rupee breached the psychologically important ₹96 level.
The decline came amid a broad rise in global bond yields. The benchmark 10-year US Treasury yield climbed to about 5.34%, its highest level since 2002, according to Reuters. Higher US yields can make dollar-denominated assets more attractive and put pressure on emerging-market currencies such as the rupee.
Foreign investors add to pressure
Foreign portfolio outflows have also been weighing on the Indian currency.
Overseas investors have been reducing exposure to Indian equities and debt as global financial conditions become less favourable. The resulting demand for dollars has added to pressure on the rupee.
The rupee’s decline has occurred alongside weakness in several other Asian currencies, while the US dollar index moved higher. Reuters reported that Asian currencies were down between roughly 0.1% and 0.4% on Thursday.
State-run banks were reported to have sold dollars during the session, helping limit the rupee’s decline
Oil prices cross $100
Higher crude oil prices are another major concern for India, which imports a large share of its crude oil requirements.
Brent crude moved back above $100 a barrel as supply concerns and disruptions in global energy markets increased. Higher oil prices raise the cost of India’s imports and can increase demand for US dollars from Indian oil companies.
This creates an additional challenge for the rupee because a weaker currency makes dollar-priced commodities such as crude oil more expensive in rupee terms.
Global bond yields hit markets
The bond-market selloff was not limited to the United States. Borrowing costs also rose across several major economies, including France, Britain and Japan.
Higher government bond yields can increase financing costs for governments and companies while reducing the relative attractiveness of riskier assets. The move has therefore affected currencies, equities and credit markets simultaneously.
Indian government bond yields also rose, with the benchmark 10-year yield reaching its highest level in more than two years, according to Reuters.
What it means for India
A sustained period of high oil prices and a weaker rupee could increase pressure on India’s import costs and inflation outlook.
Higher energy costs can feed into transportation, manufacturing and other parts of the economy. At the same time, continued foreign portfolio selling can put additional pressure on domestic financial markets.
The Indian government said on Thursday that supply disruptions, volatile energy prices and global uncertainty could pose near-term risks to inflation, the rupee and capital flows.
However, the impact will depend on how long elevated oil prices and global bond yields persist and how global capital flows evolve.
Markets await US jobs data
Investors are also watching the latest US labour-market data for clues about the future path of US interest rates.
Stronger-than-expected US economic data could reinforce expectations for higher interest rates and potentially support the dollar, while weaker data could ease some of the pressure on global bond markets.
Indian financial markets were scheduled to remain closed on October 2 for Mahatma Gandhi Jayanti, meaning investors will assess the next available market session for the rupee’s response to further moves in global currencies, bonds and crude oil.
For now, the combination of elevated oil prices, high global borrowing costs and foreign investor outflows remains an important source of pressure on the Indian currency.
Source attribution: This report is based primarily on Reuters market reporting and supporting current financial-market coverage. Figures and market levels refer to the October 1, 2026 trading session.
